IN a landmark judgment delivered just days before his retirement, the retired Chief Justice D.Y. Chandrachud, leading a nine-judge Bench, brought a long-standing dispute to a conclusion in the Property Owners Association versus State of Maharashtra (2024) case.
The verdict, rendered with an 8:1 majority, has not only put an end to a decades-long legal saga but also set a precedent that could reshape the contours of eminent domain in India.
Eminent domain is a fundamental legal concept that grants a sovereign State the authority to seize private property for public use, even without the consent of the owner, provided that just compensation is offered. This right, grounded in the public interest, enables the government to appropriate individual property for the broader welfare of society.
The clash between property rights and State authority over property was one of the most defining issues in the early years of the Indian republic. As India sought to balance its socialist aspirations with democratic freedoms, the conflict between safeguarding individual property rights and the State’s need to regulate resources for the public good became a point of contention.
While Parliament continuously tried to curtail property rights, especially through amendments aimed at redistributing land and regulating industries, the judiciary, especially through landmark cases, stood as a bulwark defending these rights under the framework of the Constitution.
The major issue dealt with in this case was the interpretation of Article 39(b) of the Indian Constitution, particularly whether the phrase “material resources of the community” includes privately owned resources beyond those controlled by the State. Article 39(b) is a Directive Principle of State Policy (DPSP) that asserts the distribution of these resources should best serve the “common good”.
This inquiry gains significance when viewed alongside the landmark jurisprudence surrounding property rights and State authority in India, where Article 31C, introduced by the 42nd Amendment of 1976, plays a pivotal role in understanding the relationship between the Directive Principles of State Policy and fundamental rights.
The Article stipulated that any law made to give effect to the policies outlined in Article 39(b) and Article 39(c) (which emphasises preventing concentration of wealth and means of production) could not be challenged on the grounds of violating Articles 14 (right to equality) and 19 (right to freedom of speech and expression) of the Constitution.
This essentially shielded laws meant to advance these directive principles from judicial scrutiny, particularly with regard to constitutional provisions that safeguarded individual rights.
Unpacking the background of the verdict
In 1986, the Maharashtra government amended the Maharashtra Housing and Area Development Act, 1976 to empower the Mumbai Building Repair and Reconstruction Board to acquire “cessed properties” for redevelopment with the consent of 70 percent of the residents.
This sparked a legal battle as the Property Owners’ Association argued that the amendment granted the State excessive powers to take over private property. The Bombay High Court upheld the amendment, invoking Article 31C, which shields laws aimed at furthering Directive Principles of State Policy from challenges under fundamental rights.
The dispute escalated when conflicting interpretations of Article 39(b) arose. This provision mandates the State to ensure that the “ownership and control of material resources of the community” are distributed to serve the common good.
The question was whether private property could be included within this definition. The controversy deepened with tenants and landlords challenging prolonged delays in redevelopment, culminating in multiple petitions reaching the Supreme Court.
The matter gained renewed attention following a 2019 amendment to the Maharashtra Housing and Area Development Act, which introduced mandatory time-bound redevelopment projects. The Property Owners’ Association accused the State of misusing welfare claims to acquire properties cheaply and transfer them to developers.
The case revolved around whether State actions under Article 39(b) could override constitutional protections under Articles 14 and 19 or if such interpretations were too expansive.
Past judgments had broadly interpreted “material resources” to potentially include private property. As scrutiny intensified, the question remained: Does “material resources of the community” necessarily encompass private property?
In 2024, the Supreme Court finally took up the matter, with a nine-judge Bench to provide clarity on this complex issue, balancing private property rights against the State’s welfare objectives.
A new judicial path
In the judgment, the Supreme Court revisited the interpretation proposed by Justice Krishna Iyer in his minority judgment in Ranganatha Reddy, where he suggested that privately held resources could qualify as community resources if their acquisition served the public good.
His interpretation had a significant influence on later rulings, including Sanjeev Coke. However, in the present case, the Bench rejected the broad application of Justice Iyer’s interpretation, making it clear that not all privately owned resources could be considered material resources of the community merely because they serve material needs.
The court clarified that the phrase “material resources of the community” must be assessed in a context-specific manner. Factors such as the nature of the resource, its effect on public welfare, its scarcity and its concentration in private hands should all be considered. There is no universal list of criteria, and the assessment should be based on the individual case at hand.
Additionally, the Public Trust Doctrine, applied in M.C. Mehta versus Kamal Nath (1997), plays a pivotal role here. This doctrine maintains that resources vital to public welfare, such as rivers and forests, must remain under State control to prevent private exploitation.
The application of this doctrine in the current case reinforces the idea that privately owned resources serving significant public purposes can still be considered material resources of the community.
A critical issue arises: What criteria should determine whether a private property is subject to public regulation? At what point does private ownership become detrimental to the public interest, and how do we balance individual rights against the common good?
By opting for a case-by-case interpretation of Article 39(b), which deals with the equitable distribution of resources, the court avoided a blanket categorisation of all private property as material resources.
This approach ensures that the court’s assessment takes into account the particular circumstances of each case. It suggests a more flexible and dynamic legal framework, which adapts to the specifics of a situation rather than adhering to rigid rules.
The court also emphasised that the term “distribution” under Article 39(b) must be interpreted broadly. It goes beyond simply nationalising resources or vesting them in the State. This broader understanding reflects a shift in governance, acknowledging that resource redistribution can occur through different methods. This opens up a broader question: Is nationalisation still a valid policy tool, or is it now an outdated approach in today’s market-driven economy?
While nationalisation, as seen in the coal and steel industries in mid-20th century India, was once seen as a means of ensuring equitable resource distribution, the court’s ruling suggests that resource redistribution may take on new forms in the modern era.
The court’s stance indicates that while nationalisation can still serve social objectives, other mechanisms may be more effective in achieving equitable access to resources in a globalised, market-oriented context.
Can the Supreme Court’s expanded review balance property rights
The concept of eminent domain has always been a contentious issue in Indian politics, primarily due to the tension it creates between development and individual land rights.
The core challenge lies in the erosion of landowners' consent, which often leads to accusations that their rights are being trampled upon by the State. In 2015, Prime Minister Narendra Modi attempted to address these concerns by presenting eminent domain as a pragmatic solution to long-term public welfare.
Modi argued that the government, as the representative of the people's collective interest, is better equipped to make decisions regarding land allocation for public use, particularly for large-scale infrastructure and development projects.
On the other hand, the judgment raises critical questions about the judiciary's role in the redistribution of property and resources in India. The Supreme Court's decision to expand judicial review over laws that limit property rights signals a significant shift from earlier precedents where laws invoking Article 39(b) were largely shielded from scrutiny. By requiring courts to examine the meaning and scope of “material resources of the community” in each case, the judgment opens the door for more robust judicial oversight in matters of property redistribution.
This shift in approach underscores a fundamental issue in Indian constitutional law: How to balance the need for equitable distribution of resources with the protection of private property rights.
Justice Dhulia’s dissent argues that the Constitution’s framers intended private property to be considered part of “material resources” under Article 39(b), which should not be excluded from discussions on wealth distribution. His perspective places the responsibility of determining wealth and its distribution squarely on the Parliament, which he sees as the best-suited body due to its democratic legitimacy and direct accountability to the people.
This approach reflects a more traditional view of governance, where elected representatives shape economic policy, ideally balancing public welfare with private property rights. However, it raises concerns about the potential for policies that favour private interests over broader social equity.
However, the majority judgment represents a move towards greater judicial intervention. It suggests that the judiciary, by engaging in case-by-case analysis, can ensure that laws redistributing private property align with constitutional principles, including the protection of fundamental rights.
This introduces an additional layer of judicial scrutiny over laws that could potentially infringe on individual rights, a shift that echoes broader concerns about the protection of property in an increasingly market-driven economy.
It also raises the question of how India’s economic landscape has evolved in recent decades. The shift from a largely State-controlled economy to one that embraces market forces following the 1990s reforms has drastically altered how wealth and property are viewed in the country.
Prior to the liberalisation reforms, the Indian government followed a more socialist approach, where the State was expected to control major resources and industries. This transition reflects a broader economic shift where wealth generation is no longer viewed with suspicion and private property rights have become more entrenched in the legal and economic system.
In light of this, it is essential to ask: How does the court’s decision align with India’s evolving economic policies? On one hand, the judgment reflects a commitment to judicial oversight and protecting fundamental rights, including property rights.
On the other hand, it also recognizes the necessity for a fair and equitable distribution of resources, especially as the country continues to adapt to its changing economic realities. The court’s willingness to evolve with India’s changing economic policies, adapting its approach to wealth redistribution in a manner that is not static but responsive to contemporary challenges, is a step ahead. But whether this approach will strike the right balance or not remains to be seen.